One of the most beneficial aspects of understanding how your own brain and mind work in trading is the profits. That’s why we do this right? Once you become mindful of your brain and what it is doing at any given time, it’s profit time.
Recently I read famed trader Jesse Livermore’s Method’s of Trading in Stocks. He concentrated on the essentials of knowledge of the company and patience. The knowledge part came from an intense focused study of the company’s products, sales and projections, news under the headlines, and ensuring it was an industry leader. Today we call an industry leader an equity showing relative strength on a chart relative to its peers.
Primo Water vs. US Soft Drinks Index
The patience part is sitting on your hands until you are quite clear it will make you money. That requires a controlled mindset not susceptible to headlines and news flow.
I found more importantly his method of getting ready for each day to enhance his knowledge and being patient was his absolute reliance on sleep. Livermore was diligent of being in bed by 10:00 pm and rising refreshed early to study the world markets in solitude while the masses were still recovering from the roaring 1920’s lifestyle(think Jay Gatsby) in NY City.
Sleep is essential for proper brain function. Neurotransmitters are replenished and hormone levels are rebalanced while we sleep. Without sleep we become irritable, agitated and easily emotionally charged from an uncooperative market. To keep your PFC vails over your amygdala outbursts we need a calm relaxed mind when all appears to be going against your trades. Livermore was a man well ahead of his times. He learned by trial and error.
Now do you think if Jesse had energy drinks, 5-hour shots and whatever other jolt we have available today he would have indulged? I don’t think so. The brain still needs its rest today as it did a century ago.
If you are having trouble getting rest because your mind starts winding up as soon as your head hits the pillow here is a little trick I’ve used for years. Visualize in your mind’s eye a complete shut down of your brain activity. Let all the random thots just float away without remaining focused on them for any period of time. I have used the scene of Obi-Wan Kenobi from Star Wars shutting down the Death Star as a primer for years. I hear the sound as a pull down the lever on my brain star. The next thing I know its morning and time to go at it again.
Enuf said.